Stanley A. GembickiStanley A. GembickiChief Technology OfficerChief Technology Officer

uopuop LLCLLC

CDMACDMASeptember 30, 2004September 30, 2004

Innovation Challenges in Technology Development

UOP LLCUOP LLC

WorldWorld’’s largest process technology licensing s largest process technology licensing companycompany

–– 30,000+ patents30,000+ patents

–– 70 licensed processes70 licensed processes

90 years of providing innovative solutions for 90 years of providing innovative solutions for the hydrocarbon processing industrythe hydrocarbon processing industryGeneral Partnership General Partnership –– owned 50/50 by owned 50/50 by business units of Dow & Honeywellbusiness units of Dow & Honeywell

–– Independent operation Independent operation -- not a subsidiary of either not a subsidiary of either companycompany

About 2,800 employees About 2,800 employees –– 50% in technology 50% in technology invention, development & deliveryinvention, development & delivery

UOP LLCUOP LLCDevelop technology that provides Develop technology that provides solutions to problemssolutions to problemsTransfer technology to customersTransfer technology to customers

–– RefiningRefining

–– PetrochemicalPetrochemical

–– Gas ProcessingGas Processing

–– Manufacturing Industries Manufacturing Industries

License, design, engineer,License, design, engineer,and service process technologyand service process technologyManufacture & supply catalysts, Manufacture & supply catalysts, molecular sieves, adsorbents, and molecular sieves, adsorbents, and specialized equipmentspecialized equipment

Continuing Innovation is Our LifebloodContinuing Innovation is Our Lifeblood

Today, I Would Like to Talk Today, I Would Like to Talk About About ……....

The challenges, enablers, and tools for The challenges, enablers, and tools for technology innovation in the 21st centurytechnology innovation in the 21st century

–– Defining the challenge, bypassing Defining the challenge, bypassing previously determined previously determined ““limitslimits

The role of innovation in meeting the current The role of innovation in meeting the current challenges of the chemical industrychallenges of the chemical industry

–– Industry outlook and key driversIndustry outlook and key drivers

Process Industry BackgroundProcess Industry Background

TThe history of the Chemical Industry is he history of the Chemical Industry is a story of technical accomplishment a story of technical accomplishment and innovation. and innovation.

AAchievements during the last century chievements during the last century have led to both tremendous growth have led to both tremendous growth and a high level of technical and a high level of technical sophistication.sophistication.

The Need for InnovationThe Need for Innovation

The 21st Century The 21st Century poses many poses many challengeschallenges

Major Innovation Has SlowedMajor Innovation Has Slowed

ProductsProducts

ProcessesProcesses

6060

5050

4040

3030

2020

1010

0019301930 19351935 19401940 19451945 19501950 19551955 19601960 19651965 19701970 19751975 19801980 19851985 19901990

YearYearProduct and process innovations from 1930 to 1985 are shownProduct and process innovations from 1930 to 1985 are shown

Inno

vatio

ns, c

umul

ativ

eIn

nova

tions

, cum

ulat

ive

Source: Chemtech 1995, 25(6), 6.Source: Chemtech 1995, 25(6), 6.

““I think the Greeks are running out of ideas!I think the Greeks are running out of ideas!””

©© The New Yorker Collection 1991 James Stevenson from cartoonbankThe New Yorker Collection 1991 James Stevenson from cartoonbank.com. All Rights Reserved..com. All Rights Reserved.[for: 1991 07 15 060 JST .HG I think] sent as Greeks.JPG[for: 1991 07 15 060 JST .HG I think] sent as Greeks.JPG

Continuous Innovation and Improvement:Continuous Innovation and Improvement:Fluid Catalytic CrackingFluid Catalytic Cracking

Octane Barrel Capacity of FCCOctane Barrel Capacity of FCC

New ReactorNew ReactorConceptsConcepts

Improved ReactionImproved ReactionSystemsSystems

Octane CatalystsOctane Catalysts

Extended RiserExtended Riser

Zeolite CatalystsZeolite Catalysts

AmorphousAmorphousCatalystsCatalysts

6,2006,200

6,0006,000

5,8005,800

5,6005,600

5,4005,400

5,2005,200

5,0005,000

4,8004,80019501950 19601960 19701970 19801980 19901990 19961996

Theoretical Octane BarrelsTheoretical Octane Barrels

Oct

ane

Bar

rels

/ 10

0 B

arre

ls F

eed

Oct

ane

Bar

rels

/ 10

0 B

arre

ls F

eed

The Technology Innovation CycleThe Technology Innovation Cycle

Industry NeedIndustry Needand/or Value and/or Value PropositionProposition

ResearchResearch Pilot PlantPilot PlantDevelopmentDevelopment

Sell ConceptSell Conceptto Producerto Producer

CommercialCommercialSuccessSuccess

TroubleshootingTroubleshootingOptimizationOptimization

1st Demo or1st Demo orCommercialCommercial

PlantPlant

Operating ExperienceOperating ExperienceIncremental Process Incremental Process

ImprovementsImprovementsNew Equipment New Equipment

New Catalytic materials

Long history of continuousinnovation in the Chemical

Industry

Long history of continuousinnovation in the Chemical

IndustryNew Catalytic materials

Steps for IncreasingSteps for Increasingthe Rate of Innovationthe Rate of Innovation

Have the mindset that innovation is not just Have the mindset that innovation is not just about technologyabout technologyWork on the right problemsWork on the right problemsIncrease the focus on radical versus Increase the focus on radical versus incremental innovationincremental innovationLeverage internal capabilities with external Leverage internal capabilities with external capabilitiescapabilitiesSpeed is essential, have a sense of urgencySpeed is essential, have a sense of urgency

Chemical Industry RealitiesChemical Industry RealitiesClean FuelsClean Fuels-- Cost Effective Ways to produce zero Cost Effective Ways to produce zero

sulfur/low nitrogen transportation fuelssulfur/low nitrogen transportation fuelsNon Conventional FeedstocksNon Conventional Feedstocks-- Stranded Natural GasStranded Natural Gas-- Renewable sourcesRenewable sources

Improved Industry Profitability Improved Industry Profitability -- Invest capital required for expected Invest capital required for expected

capacity requirementscapacity requirements-- Lower Lower capitalcapital intensityintensity-- Reduce variable costsReduce variable costs

Minimize Environmental ImpactMinimize Environmental Impact-- Plant emissionsPlant emissions-- Spent catalyst handlingSpent catalyst handling

Innovation Enablers Innovation Enablers Combinatorial Chemistry Approach to DiscoveryCombinatorial Chemistry Approach to Discovery

Advanced Catalyst Characterization at theAdvanced Catalyst Characterization at theAtomic Level Atomic Level The Application of Theoretical Methods The Application of Theoretical Methods to Catalysis to Understand Active Site to Catalysis to Understand Active Site Structure and Mechanism Structure and Mechanism The Discovery of New Materials, The Discovery of New Materials, Zeolites, NZMS, and their Zeolites, NZMS, and their Application to CatalysisApplication to CatalysisProcess Miniaturization and Process Miniaturization and IntensificationIntensification

Increasing Barrier to Technology Increasing Barrier to Technology Innovation: CommercializationInnovation: Commercialization

ResearchResearch Pilot PlantPilot PlantDevelopmentDevelopment

Sell ConceptSell Conceptto Producerto Producer

CommercialCommercialDemonstrationDemonstration

With new tools to drive innovation,With new tools to drive innovation,the focus shifts to challenges downstreamthe focus shifts to challenges downstream

in new technology commercializationin new technology commercialization

Less Desire to Take RiskLess Desire to Take Risk

Industry ConsolidationIndustry Consolidation–– Fewer, bigger companiesFewer, bigger companies

Profitability ChallengesProfitability ChallengesLarger plant sizes for Larger plant sizes for economy of scaleeconomy of scaleLimited discretionary Limited discretionary capital spending in capital spending in refining refining Let someone else beLet someone else be

the first to try newthe first to try newtechnology!technology!

SummarySummaryThe Chemical Industry faces a number of The Chemical Industry faces a number of significant challenges: feedstock availability; significant challenges: feedstock availability; sustainability realities; profitability; capital sustainability realities; profitability; capital intensityintensityWhile technology is maturing in many markets, While technology is maturing in many markets, new new ““enablersenablers”” exist to push technology exist to push technology developments into the new century. Meeting key developments into the new century. Meeting key industry needsindustry needsIndustry trends are increasing the reluctance of Industry trends are increasing the reluctance of producers to take risks in being the first to producers to take risks in being the first to commercialize new technologycommercialize new technology““PartneringPartnering”” between Technology developers and between Technology developers and ““UsersUsers”” is critical to overcoming these barriersis critical to overcoming these barriers